Ordinary investors often ascribe a level of glamour to hedge funds. After all, these investment vehicles are typically the territory of big money market participants, including endowments, pensions, and ultra-high-net-worth clients.
Retail investors’ enthusiasm for hedge fund access is palpable. Some ETF issuers have introduced products that mirror hedge fund strategies. However, investors looking to access baskets of stocks that are widely held by hedge funds don’t need to venture into exotic fare. The Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) answer that call.
Based on the recent spate of 13 Filings, Goldman Sachs updated its Hedge Fund VIP basket, which contains the 50 stocks that appear most frequently among hedge funds’ top 10 holdings. Seven of the 10 stocks appearing most frequently among hedge funds’ top long equity positions are members of the Nasdaq-100 Index (NDX), which serves as the benchmark for QQQ and QQQM.
Hedge Fund Utility With QQQ, QQQM
As noted above, there are various ETFs on the market today that democratize hedge fund access for retail investors, employing a variety of strategies. And as was also mentioned above, QQQ and QQQM follow the Nasdaq-100 – an easy-to-understand benchmark.
That simplicity doesn’t diminish the utility of the Invesco ETFs as backdoor entries for investors looking to access popular hedge fund holdings, particularly at a time when those money managers are enthusiastic about large- and mega-cap growth stocks.
For example, Amazon (NASDAQ:AMZN) – the largest consumer cyclical holding in QQQ and QQQM – is a top 10 holding for 97 hedge funds, according to Goldman data. Microsoft (NASDAQ:MSFT) is second as it’s a top 10 holding for 90 hedge funds. That pair of stocks combine for nearly 15% of the QQQ and QQQM portfolios.
Seventy-seven hedge funds feature Facebook parent Meta Platforms (NASDAQ:META) among their 10 biggest long equity positions while another 49 sport Alphabet (NASDAQ:GOOG) among their 10 largest equity holdings. Those two stocks are the largest communications services components in the two Invesco ETFs, combining for 9.72% of the rosters.
Like ordinary investors, hedge funds are displaying plenty of enthusiasm for the artificial intelligence (AI) theme and they’re expressing that confidence by way of chip giant Nvidia (NASDAQ:NVDA), which delivered strong quarterly results last week.
Nvdia, which accounts for 4.67% of the QQQ and QQQM lineups, is a top 10 holding for 38 hedge funds.
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Article by Tom Lydon, ETF Trends